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Dentsu Aegis Network’s organic profit slumps in APAC despite global growth

Dentsu Aegis Network has posted global gross profit growth of 17.1 per cent on the back of US$5.2 billion worth of new business.

In a global market described as ‘difficult’ by rival Publicis in its annual report last week, DAN reported 5.4 per cent growth in global revenues, a figure largely helped by the company’s recent spree of M&As.

Dentsu CEO Pr Toshihiro Yamamoto: “We are upbeat about the prospects for further new business growth in FY2018.”

Last year, DAN made a total of 31 acquisitions and investments, beating WPP as the holding company with the most M&A activity.

However, closer to home, things looked less rosy for DAN. In Asia-Pacific, organic profit growth hit a  90 per cent slump between 2016 to 2017.

Two years ago, the company grew by 7.9 per cent – a fall from 11.4 per cent in 2015 – while this year DAN only achieved profit growth of 0.6 per cent.

Like Publicis last week, DAN also cited China as a sore point, calling it a “challenging market”.

The company report stated: “Our exposure to Western and Japanese clients remained solid but reduced spend by local clients continued. Recent management changes in China will strengthen our position going forward.”

The leadership changes referred to by DAN include the recent appointment of Susana Tsui as chief executive officer for China, taking over from Phil Teeman. 

This week, DAN also announced its subsidiary Isobar Group would reorganise its leadership to put more stress on consultancy. The company is to reorganise current operations into four cross-agency functions: client servicing, specialist, product development and business support.

Meanwhile, Australia – where Dentsu operates Carat, Isobar and MKTG – saw a fourth quarter recovery after poor second and third quarters.

Dentsu president and CEO, Toshihiro Yamamoto, said the global operations are looking towards data-driven advertising to drive profits in 2018 with the M1 addressable media platform being rolled out internationally during the year.

“Dentsu Aegis Network continues to invest in data capabilities,” said Yamamoto in the release. “The M1 platform is a key pillar of our data strategy and is the first phase in realizing our vision for all media planning and activation to be people based. FY2018 will see the rollout of the M1 platform outside of the US.

“At Dentsu in Japan, we are committed to accomplishing our work environment reforms for future growth by the end of FY2018.

“Looking ahead, the record year for net new business at Dentsu Aegis Network showcases the strength of our talent and the competitiveness of our product. We are upbeat about the prospects for further new business growth in FY2018. We remain committed to differentiating our product offering and momentum is with the business as we enter FY2018.”

The company is expecting low to mid-single digit organic gross profit growth for Dentsu Aegis next year, forecasting in its network ad spend report that global growth will be 3.6% in 2018 on the back of the Winter Olympics, FIFA World Cup in Russia and US Congressional elections.

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